Indian companies brace up to face new challenges ahead

India’s corporate investment in the UK and beyond into EU has emerged as a ‘Brexit’ worry, more than trade and investment investment.Kirtika Suneja&Ruchika Chitravanshi | ET Bureau | June 25, 2016, 09:33 IST

UK is India’s third biggest investor in terms of overall FDI since 2000 but in the recent years the investment has been on the down.NEW DELHI: India’s corporate investment in the UK and beyond into EU has emerged as a ‘Brexit’ worry, more than trade and investment investment that have been tepid of late. In 2015, India was UK’s third biggest investor, following a 65% rise in number of FDI projects from a year ago.

"Indian companies view the UK as a gateway to Europe," CII president Naushad Forbes said in a statement.

Minister of State for Finance Jayant Sinha also reiterated the importance of this engagement with the UK. "Our companies working in UK and EU need to retool there strategy because trade relations will change. We will give all support to put companies to overcome any such situation in euro zone," Sinha said. Industry was optimistic of adjusting to the emerging situation.

"Indian companies will re-engineer their European strategy. This should not be an issue," Forbes said. Commerce and Industry Minister Nirmala Sitharaman said currency volatility may have an immediate impact on exporters but India would continue to attract investments due to its strong fundamentals.

"As we move forward, what impact that is going to have, we will keep watching. I hope there will be more opportunities for us to expand," she said.

UK is India’s third biggest investor in terms of overall FDI since 2000 but in the recent years the investment has been on the down.

Investment from the UK fell to $898 million in FY16 from $3,215 million in FY14. India’s trade with UK has also been stagnant at around $14 billion with a downward bias. The global risk-0ff due to ‘Brexit’ could, however, impact inflows into India.

"During uncertainty, investment decisions get postponed but if we keep pushing for incremental reforms, the impact on FDI (foreign direct investment) inflows will not be adverse," said DK Joshi, chief economist, Crisil. Exporters fear that with pound and euro depreciation could change the dynamics further.

"In the immediate future, volatility in currency may put pressure on India’s exports as both the British pound and euro will depreciate, giving greater competitiveness to their products, particularly in third countries," the Federation of Indian Export Organisations said in a release. "But there is no need to panic as things will settle down soon. The real impact of Brexit can be assessed only after the final negotiation between EU and Britain is worked out."